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Energy Company Investments. What Investors Need To Know about Regulation CF

Energy Investments for Accredited and Non-accredited Investors

What is Section 4(a)(6)?

 

Section 4(a)(6) under the Securities Act of 1933 (1933 Act) is an exemption to the general requirement that a company must register its securities to be offered and sold with the SEC. Section 4(a)(6) is sometimes referred to as Regulation CF or Title III. This new rule implemented the requirements of the JOBS Act in 2015., Section 4(a)(6) is a mechanism that enables anyone to fund startup companies and small businesses in return for equity. Investors invest money in a business and receive ownership of a small piece of that business.

Section 4(a)(6) allows companies to raise up to $1,070,000 from investors within a 12-month period using funding portals registered with the SEC, like EnergyFunders Marketplace.

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To learn more about Section 4(a)(6) offerings, please see the recently adopted SEC rules.

Investor Requirements

Can anyone invest?

 

Yes, you can invest! Anyone can invest at least $2,200 per year in EnergyFunders Marketplace offerings. If you want to invest more than that, there are restrictions on how much you can invest depending on your annual income and your net worth. EnergyFunders Marketplace follows SEC rules in determining how much investors can invest in an offering.

How much can I invest through EnergyFunders Marketplace?

 

For Section 4(a)(6) offerings, the SEC limits how much investors may invest in private companies in a given year. Section 4(a)(6) investors may invest the greater of $2,200, or 5% of the lesser of their annual income or net worth if the investor’s net worth or annual income is less than $107,000. A Reg CF investor may invest 10% of the lesser of their annual income or net worth if both their annual income and net worth are equal to or more than $107,000. There is a $107,000 aggregate investment limit across all issuers during any 12-month period.

Can you give me some examples of the limits on the amount of my investment based on income and net worth?

 

The following table created by the SEC provides a few examples:

 

Annual IncomeNet WorthCalculation12-month Limit
$30,000$105,000greater of $2,200 or 5% of $30,000 ($1,500)$2,200
$150,000$80,000greater of $2,200 or 5% of $80,000 ($4,000)$4,000
$150,000$107,00010% of $107,000 ($10,000)$10,700
$200,000$900,00010% of $200,000 ($20,000)$20,000
$1.2 million$2 million10% of $1.2 million ($120,000), subject to cap$107,000

Joint calculation. You can calculate your annual income or net worth by jointly including your spouse’s income or assets. It is not necessary that property be held jointly. However, if you do calculate your income or assets jointly with your spouse, each of your crowdfunding investments together cannot exceed the limit that would apply to an individual investor at that annual income or net worth level.

What is an accredited investor, and why would I want to verify my accredited status?

To be considered an accredited investor you must have a net worth of at least $1,000,000, excluding the value of your primary residence, or have an annual income of at least $200,000 each year for the last two years (or $300,000 combined income if married) and have the expectation to make the same amount this year. The term “accredited investor” is defined in Rule 501 of SEC Regulation D.

Some offerings on EnergyFunders Marketplace are “side by side offerings”. That means that once allocation fills up in the Section 4(a)(6) offering, there could be additional shares available for accredited investors only through Regulation D 506(c). In order to have access to all potential shares, you should verify your status as an accredited investor.

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